Last week chips got destroyed. Tuesday investors decided they were cheap enough to buy again. Micron up 10%. Sandisk up 10%. SK Hynix up double digits. Biggest single day gain for the semiconductor index in a month. Then futures dipped overnight ahead of Alphabet and Tesla. Reality check time.
Nasdaq Rebounds as Semiconductor Stocks Lead the Rally
Nasdaq climbed 1.3% Tuesday. S&P 500 gained 0.9%. Dow added 385 points or 0.7%. Clean broad rally after three consecutive down sessions.
Chip stocks led everything. Micron, Sandisk, SK Hynix, and Seagate all surged more than 10% in a single day. Intel, AMD, and Applied Materials each gained at least 7%. PHLX Semiconductor Index rallied 5.2%. Strongest one day gain for the chip index in about a month.
That is a significant reversal from a week that saw the same stocks fall 10% to 13% in single sessions. Same companies. Same AI thesis. Two completely different reactions one week apart.
Why Investors Are Buying Chip Stocks Again
Market shrugged off concerns about Chinese AI competition that had been cited as part of the recent selling pressure. Logic from buyers on Tuesday was straightforward. More companies building AI models does not reduce chip demand. It increases it. Every new AI player needs computing power, memory, and storage just like the existing ones.
From that angle last week’s selloff starts looking less like a warning about the AI trade and more like a valuation reset that created better entry points. Expensive stocks that fall 15% in a week are simply less expensive. When the underlying demand story has not changed buyers eventually come back.
Whether that logic holds up depends entirely on what earnings show this week. Tuesday was a bargain hunt. Wednesday is when companies have to prove the bargain was real.
Nasdaq Futures Slip Ahead of Alphabet Earnings
Despite Tuesday’s strong session futures dipped going into Wednesday. Dow futures off about 0.2%. S&P 500 futures down 0.3%. Nasdaq futures slipped 0.8%.
Pre-earnings caution is normal. Traders who bought the dip Tuesday are now sitting on overnight gains heading into results that could either validate the rebound or reverse it quickly. Reducing risk before big earnings is a rational move even when the prior session was positive.
Alphabet Earnings Could Drive AI Infrastructure Spending
Alphabet reports after the close alongside Tesla and IBM. Three major companies on the same evening after a week that included Netflix down 9% and IBM crashing 25% on preliminary results.
For chip stocks specifically Alphabet’s capital expenditure guidance matters most. Alphabet spending $200 billion on data centers this year means enormous ongoing demand for chips, memory, servers, and all the infrastructure that semiconductor companies supply. If Alphabet signals it is pulling back on spending that directly challenges the demand case that drove Tuesday’s rally.
If Alphabet raises capex guidance or maintains aggressive spending plans it validates the thesis. Companies buying AI infrastructure is what creates chip demand. Alphabet is one of the largest buyers. What they say about future spending moves the chip sector.
Tesla is a different story. Car company with an AI adjacent angle through autonomous driving. Margins and robotaxi progress are what move that stock. Less direct connection to chip demand but a major Nasdaq component that influences overall index sentiment.
Can Semiconductor Stocks Extend Their Recovery?
Two weeks of chip selling created a narrative that the AI trade was overvalued and running out of steam. Tuesday’s 5% chip index rally pushed back against that narrative hard.
Now earnings have to settle the argument with actual data. Alphabet’s cloud growth and capex plans. Tesla’s margins and delivery profitability. Intel’s guidance after falling 13% last week. Each report adds to or subtracts from the case that chip stocks deserve to be where they were before the recent selloff.
Tuesday showed buyers are willing to come back after big drops. Wednesday shows whether those buyers made a good decision or got caught in a bear market bounce. Futures being slightly negative heading into the session suggests the market is not assuming the answer is positive. It is waiting to see.